The personal blog of Peter Lee a.k.a. "China Hand"... Life is a comedy to those who think, a tragedy to those who feel, and an open book to those who read. You are welcome to contact China Matters at the address chinamatters --a-- prlee.org or follow me on twitter @chinahand.

Saturday, April 28, 2007

David Asher’s Dead End

"Presumed guilty until proven guilty" makes for a quick and easy North Korea policy...but it's no substitute for global diplomacy“Banco Delta was a symbolic target. We were trying to kill the chicken to scare the monkeys. And the monkeys were big Chinese banks doing business in North Korea...and we’re not talking about tens of millions, we’re talking hundreds of millions.” David Asher, oral testimony, April 18, 2007

We gave them back the chicken...is the monkey still scared? Brad Sherman (D-CA), Chairman, House Foreign Affairs Subcommittee on Terrorism, Nonproliferation, and Trade, April 18, 2007

David Asher’s testimony before a joint House subcommittee on April 18 provided considerable entertainment—inadvertent as well as intentional.

It also revealed some things about North Korea, a lot about the Bush administration and David Asher--and gave little reason to be optimistic about U.S. policy in Northeast Asia.

Certainly, the Chinese are wondering if there are any tangible rewards for engaging with the United States on North Korea—beyond serving as a target of U.S. financial coercion—and as result are probably less than enthusiastic about helping us out on Iran.

Asher—who served the coordinator of North Korea Activities Group at State Department from 2001 to 2005 and takes credit for a raft of activities harassing Pyongyang, including the Patriot Act Section 311 action against Banco Delta Asia-- was brought to the hearing by California Republican Ed Royce to provide conservative talking points on North Korea (Asher’s opening statement and subsequent responses can be found after the 1:58 mark in the webcast).

Asher articulated the hard-line view that using Treasury sanctions to force North Korea to abandon its alleged counterfeiting and proliferation-related activities was more important than the Six Party process, stating explicitly that, in his personal opinion,

“I don’t think the North Koreans are going to give us any more than a freeze for compensation”.

And

“We designed this initiative with the goal of countering these [illicit] activities themselves...not necessarily supporting the Six Party talks.”

Nothing like designing failure into the Six Party process at the start, David.

To help Asher get his point across, Royce framed his questions around Asher’s published statements, making assertions that Asher, naturally, was only too eager to endorse.

As in:

Royce, April 18, 2007:

Referring to allegation of North Korean counterfeiting:

"What would happen if we just decided to implode that regime by responding to an act of economic warfare in a way that embargoed that system?...This is the first time since the second world war that one country has copied another country’s currency..."

Under International Law, counterfeiting another nation's currency is an act of causus belli, an act of economic war. No other government has engaged in this act against another government since the Nazis under Hitler.

Royce also had a ready made laugh line to contribute to the tag team entertainment, having mocked the North Korean request for two counterfeit bill detecting machines during the morning testimony.

Asher (who, I’d be willing to bet a jar of kimchi fed Royce the story in the first place), didn’t even wait for a prompt and jumped in himself:

"[North Korea is] interested in obtaining bill detectors so they can improve the quality of their counterfeit...I think it’s likely they’ll be making efforts to counterfeit our new bills which would mean that we’d have redesigned our dollars twice now because of North Korea and we’d have to do it a third time..."

Given the growing doubts swirling around the North Korean counterfeit story (Asher himself twice remarked agitatedly, “some people think we’re making this stuff up...”), I would personally give some credence to the idea that the North Koreans need the machines so they can vet their cash locally, now that having it checked by money center banks like HSBC New York (as BDA did) is apparently no longer possible.

However, the revolting mental image of a leering Kim Jung Il salaciously violating our greenbacks (causus belli, baby!) is central to the conception of North Korea as a rogue actor on the world stage .

Therefore, I expect the Supernote story to be defended to the last ditch.

Asher, a conservative-leaning Japan expert whose career arc has included stints at the American Enterprise Institute and Heritage Foundation as well as the State Department, has built his public career on hyping the criminality of the North Korean regime.

The title of his November 2005 paper, "The North Korean Criminal State, its Ties to Organized Crime, and the Possibility of WMD Proliferation", pretty much says it all in terms of Asher’s conceptual framing of the North Korea issue.

By his formulation, North Korea (or the “Soprano state”, as he refers to it) is, in its essence, criminal and, in any and all conduct of its international activities, is assumed guilty... until proven guilty.

In his oral testimony on April 18, Asher took the argument to the dingbat quadrant.

North Korea is being accused of inflating or manufacturing insurance claims (using “suspiciously” complete and timely documentation) to defraud Lloyd’s names in cases involving $150 million in coverage.

Asher, who was quoted in the article that presumably inspired his remarks, got a little carried away in his testimony, characterizing the proceeds as “pure profit”, disregarding the fact that actual losses such as sinking ferryboats and burning warehouses had occurred, and that the North Korean insurance company had to pay for the reinsurance it acquired on the London market.

Then he grabbed the ball and took it to a new level:

"...[the North Koreans] even scuttled, apparently, one of their ships. They collided deliberately with a Hyundai merchant ship in the middle of the Indian Ocean. It carried $70 (?) million dollars in insurance. The ship...their ship...collided with the Hyundai ship—this is right in the middle of the run-up to the 2000 summit and the ship, even though it had basically a dent in its bow, it just merely [sic] sank which implies it was exploded. They blew it up and sank it...a great way to collect insurance."

A compensation payment of US$6m has been made by Hyundai Group for the sinking of the North Korean bulker Manpok in March last year. A collision between the 4,411 teu Hyundai Duke and the 15,193 dwt Manpok, carrying a cargo of cement at the time, resulted in the loss of 37 lives aboard the bulk carrier, which sank within moments after the incident 500 miles from Colombo, Sri Lanka. Only two crew were found and rescued by the 1992-built box ship. In a statement, Hyundai said that insurance firms representing both the company and the North Korean government, who owned the Manpok, had reached an agreement on the amount of compensation to be paid. The circumstances of the collision have been surrounded by controversy since it happened, with reports from the Hyundai Duke stating that the Manpok cut across its bow denied by the North Korean government, who claim that the container ship had been shadowing the bulker.

The Hyundai Duke, by the way, is a 52,000 ton behemoth. It, not the Manpok, sustained minor damage to its bow. The Manpok, as befits a little bulk carrier struck either on the side or stern by a vessel at least 3 times larger steaming at 25 knots, sank like a rock, with all but two of its crew perishing.

As to the insurance settlement, the Korea Times reported:

Amid rescue operations for the missing North Korean seamen, two insurance experts have been dispatched to Colombo, Sri Lanka to investigate the cause of Wednesday's boat collision, said a spokesman for Hyundai Merchant Marine Co. (HMM) yesterday.The spokesman said that one of the two is a Korean marine surveyor appointed by Hyundai Maritime and Fire Insurance Co. and the other is a British surveyor dispatched by the London-based Britannia P&I (Protection and Indemnity) Club. The Hyundai Duke, which collided with a North Korean freighter in the Indian Ocean, is insured by Britannia P&I Club and Hyundai Maritime and Fire Co.

...

Yoo said that in the case of HMM, Britannia will cover the human losses from the collision, with Hyundai Maritime and Fire Insurance taking full responsible for all damages to the vessels."When the final report comes out, then we will decide on whether we will compensate for the physical and human losses of North Korean seamen purely from the humanitarian point of view," Yoo said. (Kang Seok-jae, Insurance experts sent to Sri Lanka to investigate cause of boat collision, THE KOREA HERALD, April 3, 1999)

Did the captain of the Manpok steer his boat in front of a South Korean container vessel and then go the extra mile and blow up his ship (with its high value declared cargo of cement, for Chrissakes) and his crew after the crash just to be sure to slake his master’s kleptocratic lust for insurance company gold?

Or is David Asher a dingbat?

I guess this is why these guys prefer not to testify under oath.

There are a few conclusions that can be drawn, beyond the observation that David Asher is sloppy and irresponsible in his testimony before Congress.

First, Mr. Asher is still partying like it’s 2002, when the U.S. (or at least Colin Powell) had the credibility to accuse Saddam Hussein of anything and everything under the sun and when Saddam tried to clear himself, Donald Rumsfeld could harrumph “absence of evidence is not evidence of absence.”

That *ahem* ship has sailed, David. Or sunk.

The hardliners will have to do better than Asher’s junior G-man tales of running stings with fake weddings against Chinese triads to interdict small quantities of NORK counterfeit currency, cigarettes, Viagra, and meth...or easily debunked stories about extravagant suicidal insurance frauds...to make their case about the dangerously criminal character of North Korean regime.

Otherwise, the North Korean effort will be tainted by the same perception of cherrypicking, mendacity, and special pleading that is the enduring legacy of America’s Iraq intelligence.

Asher’s testimony makes one wonder about the quality of our dossiers, the honesty of our representations, and the validity and effectiveness of our tactics.

In this context, I found it most interesting that Asher brought up the issue of the 2000 summit “cash for peace” bribe.

South Korea’s prime minister at the time, Kim Dae Jung, has admitted to passing US$100 million to North Korea to facilitate the historic North-South summit (and Kim’s Nobel Prize).

Hyundai Asan, the intermediary, also passed on another US$400 million, either to smooth the way for its own business plans for North Korea or on behalf of the government in an additional unacknowledged payoff.

The financing is made rather murky by the fact that Kim Dae Jung was apparently joined at the hip with the particular chaebol faction running Hyundai Asan, and unleashed a torrent of $3 billion in government and private loans—to prop Hyundai up in the liquidity crunch following the Asian financial crisis, to smooth the way for his summit, and allegedly, to create a campaign slush fund for certain politicians and provide graft for some well-compensated political fixers.

All one can say is, the 2000 summit was very good for Kim Jung Il.

And if Kim spent the $500 million to develop his nuclear deterrent instead of blowing it on cars, cognac, and Swiss bank accounts, he probably considers it the best $500 million he ever spent.

It looks like that money made it to North Korea via Macau and it looks like that really annoys David Asher:

"...this may sound a little bit exaggerated but the South Korean government alone poured something on the order of $500 million dollars in bribes in order to obtain the 2000 summit and they investigated this...it’s been prosecuted in their courts...in the banks in Macau...in banks accounts which were--we would assume were—controlled by Kim Jung Il, that’s certainly what they assessed."

Grousing about purported income from illicit activities is one thing.

But Asher’s annoyance over Macau’s role in the summit payoff—a piece of checkbook diplomacy that violated plenty of South Korean laws but involved no illicit activity by North Korea—must be traced to the fact that Kim Jung Il got half a billion legal dollars out of it.

The summit bribe must hang like a dark cloud over hardline efforts to isolate, destabilize, and perhaps topple the North Korean regime through financial pressure.

What’s the point of all this time, work, and vexation of trying to financially isolate Pyongyang if South Korean business and government can just write North Korea some big checks any time Kim Jung Il feels backed into a corner and decides to trade some concessions for cash?

Perhaps one objective of the whole Macau brouhaha was to have a chilling effect on checkbook diplomacy, by making the Pyongyang and Seoul anxious that America might drop the hammer on some Macau bank just when it’s got a huge payoff from Hyundai sitting in a North Korean account.

An unexamined by-product of this initiative might be resentment by South Korean government of unilateral and coercive US efforts to pre-empt checkbook diplomacy, a prudent measure that I imagine is closer to Seoul’s diplomatic strategy than trying to kick Pyongyang’s financial can all over Asia.

Asher seems intent upon poisoning the well for State Department’s diplomatic initiatives, not only for North Korea, but also for Macau, China, and, by extension, Iran, with his relentless boasting about the Patriot Act Section 311 sanctions.

In his oral testimony (1:57), Asher stated:

"The Illicit Activities Initiative prominently involved the use of several—the development of the—conceptualization of the use of several of the tools you’re discussing today including USA Patriot Act Section 311. We worked hand in glove with the Treasury Department to apply and plan to apply against North Korea, and after a time of deep research we came to conclude that one of the best spots was in Macau against Banco Delta Asia."

Trouble is, that makes this March 2006 press release from the State Department look kinda like a lie...

Treasury Briefs North Korea on U.S. Financial System Protections

Regulatory action against Macau bank not meant as sanction on North Korea

...The Treasury Department stressed that the Section 311 action against BDA was not intended as a sanction against North Korea and should be considered matter completely separate from the Six-Party Talks, the ongoing negotiations on nuclear programs on the Korean Peninsula that involve the United States, North Korea, South Korea, China, Japan and Russia.

Asher’s statement raises a raft of questions, such as, if the BDA action was truly directed against North Korea (which, I think, most people believed at the time, despite Treasury’s protestations), why wasn’t it better coordinated with the Six Party talks?

In other words, why did we announce this sanction at the same time that North Koreans had announced a return to the Six Party Talks, thereby giving them a reason to walk out and, apparently...

...convince them that they would get a lot further in their negotiations with the United States if they came back to the talks armed with an atomic bomb, instead of simply enveloped in warm feelings about American good faith and reasonableness?

Awkward...

I’m sure David Asher doesn’t want to go down in history as one of the fathers of Kim Jung Il’s atomic bomb...

...or, perhaps, Iran’s.

Which is the way it might go down, if Asher’s efforts to tangle Macau and the PRC in the Patriot Act web succeed.

Growing out of the premise that North Korea was essentially a criminal state, since Macau was handling North Korean money—and had the presumption to assert that the transactions were legal--well then, Macau had a problem, too:

"DPRK had for decades enjoyed a protected relationship with Macau’s government and many of the business leaders and political leaders that reached far beyond Banco Delta Asia. Not only was Macau a global center for North Korean proliferation, and for illicit activities, it was also a central node for managing the...kleptocratic finances of Kim Jung Il."

Strong words. And there is, of course, more.

Such as Asher’s statement quoted at the top of the article:

“Banco Delta was a symbolic target. We were trying to kill the chicken to scare the monkeys. And the monkeys were big Chinese banks doing business in North Korea...and we’re not talking about tens of millions, we’re talking hundreds of millions.”

The implication being, if China refused to share the US assumption that North Korean funds were illicit and act and investigate accordingly, Chinese banks would become subject to US sanctions.

So the action against Banco Delta Asia wasn’t just a legal action against a dirty bank, or a targeted sanction against illicit and WMD-complicit sectors of the North Korean economy.

It was a broad embargo, orchestrated globally, with threats of financial sanctions against the entire North Korean economy and regime, and also against North Korea’s enablers in Macau...and North Korea’s patron, the People’s Republic of China.

That’s a pretty big deal.

Most people have such an ingrained revulsion for Kim Jung Il’s regime that any action that sticks a thumb in Dear Leader’s eye is welcomed, no matter what the implications for US credibility as an ally, a negotiating partner, enforcer of international good-guy norms, or even the superpower that cares about keeping its facts or just its stories straight.

But China is a different matter, and I wouldn’t be surprised if concern over Asher’s reckless enthusiasm for strongarming Macau and China as part of his anti-North Korea campaign contributed to his departure from the State Department in 2005.

It would be easily to dismiss Asher’s anti-DPRK initiative as Axis of Evil nostalgia and hardliner overreach run amok, now that the realists are supposedly running North Korea policy and Asher is free to babble about his dubious achievements and undeniable ambitions while ensconced at a right-wing think tank.

Except for one thing...

...the State Department realists supposedly running our North Korea policy have been unable to get beyond the BDA cul de sac, even after the general exodus of Asher and other hardliners from State.

As far as can be seen, the problem is not with the Section 311 decision that has cut BDA off from the US financial system.

The problem seems to be that the US government is still threatening additional sanctions against non-US banks if they handle the $25 million.

It doesn’t seem plausible, given the mare’s nest that l’affaire BDA has become, that Treasury needs to preserve the credibility of its campaign against Iran by taking further unannounced action to tie up the North Korean funds and make a bad situation even more embarrassing.

Instead, the ongoing imbroglio implies that the Bush administration cannot move beyond its predilection for secretive, deceptive, and coercive unilateralism and dreams of regime change.

It also indicates that Washington’s willingness to engage China as a global security partner is subject to so many unspoken caveats (like “we’ll cut Bank of China off from the US financial system if you don’t go along with us on North Korea”) that it is virtually meaningless.

Taken together, that’s not good news for a successful, global united front against Iran.

Let’s hope that the last two years of Bush administration diplomacy isn’t remembered as David Asher’s dead end.

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